How Budget 2025 Could Shape India’s Economic Future Amid Global Headwinds?

India holds a distinct edge on the international scene since it is one of the few economies of scale and a political haven amidst raging storms. Worries have been raised over valuation-driven overheating in Indian equities, yet there is still a strong desire to invest in India even with some expected correction. Since the Union Budget 2025 must make up for weak economic growth, decreased spending, and muted demand, it will be crucial to markets. Individual expenditure and national growth might be revitalised by the budget's reduced personal income tax slabs, robust fiscal reduction strategy, and higher infrastructure funding.

Economic Policy and Budget 2025: How India Plans to Tackle Global Challenges?

"With the falling rupee, inflationary pressures, and global economic uncertainty, Union Budget 2025 can provide much-needed support. India's real GDP growth is estimated at 6.4% in FY25 lower than 8.2% in FY24. At the same time, FDI inflows have grown by a healthy number of 42% YoY to $42.13 billion in July - September 2024. This is a sign of foreign investor's trust in India's robust economic growth and resilience against global uncertainties," said Subhash Chand Aggarwal, Chairman & Managing Director Of SMC Global Securities Ltd.

"With the expectation that there might be a rise in the infrastructure capex allocation and widening of the PLI scheme to more sectors in the upcoming budget, India's capital goods and manufacturing sectors will see an upward trajectory. Additionally, to tackle the inflationary pressure, the budget might see a reduction in the personal income tax rates and an increase in the standard deduction, boosting consumer demand and supporting economic growth," he further added.

2. How Budget 2025 Impact MSMEs and Job Creation in India?

"India's MSME sector contributes around 30% of India's GDP and 45% of total exports. In times of volatile rupee, it is expected that the upcoming budget will extend the interest equalization scheme for 5 years. It will help the exporters avail of rupee export credit at competitive rates and get subsidies for pre- and post-shipment rupee export credit. Also, the extension of the collateral-free led credit guarantee scheme to a higher loan base can provide good support. MSME boost can also foster job creation in India, as this sector contributes 62% of the total employment," said Subhash Chand Aggarwal.

Incentivizing domestic manufacturing, rationalizing tax rates, and a faster refund scheme for exporters can support the MSME growth which holds the maximum share in job creation. Union Budget 2024 saw a launch of the ELI Scheme to support job creation, the upcoming budget can focus on bolstering vocational training, encouraging entrepreneurship, and incentivizing businesses for employment generation.

3. Will Budget 2025 Revamp India's Trade and FDI Policies?

"In the Union Budget 2024, the proposal to simplify rules and regulations for FDI and overseas investment was announced. It is expected that the Budget 2025 will likely relax the FDI regulations, especially the 100% FDI allowance in the insurance sectors. On the trade counterpart, exports are one of the biggest growth engines for the Indian economy as the trade deficit has been reduced to $21.94 billion in December 2024 from the November 2024 revised deficit of $32.84 billion. The Budget 2025 might see an extended interest subsidy for exports, rationalization of custom duties, setting up of e-commerce export hubs, supporting agri-exports, and finalization of FTAs," commented Subhash Chand Aggarwal.

4.⁠ ⁠Economic Policy Wishlist for Budget 2025: What Industries Expect?

" Union Budget 2025 will play a key role in markets as it has to compensate for poor economic growth, lower consumption, and subdued demand. With the higher infrastructure allocation, strong fiscal consolidation approach, and lower personal income tax slabs, the budget could revive both individual spending and country-level growth," said Subhash Chand Aggarwal.

The BFSI sector, specifically, is looking for lower tax rates on long-term capital gains and aligning with fixed deposits to boost investment. To increase the insurance penetration, there is a need to reduce GST rates on insurance premiums and higher tax exemption benefits. Increasing allocation for digitalization schemes, a dedicated funding window for microfinance institutions, and the introduction of new schemes to boost financial inclusion, especially among women, might be there in this Budget radar to boost the BFSI sector, according to him.

5. Budget 2025: Will Fiscal Prudence and Growth Priorities Strike a Balance?

"Lowering capital expenditure and spending by the government may lead to a reduction in fiscal deficit but it directly hampers the economic growth of the country. In the April - November 2024 period, the government capital expenditure fell by 12.3% YoY. For FY2024-25, India's fiscal deficit was estimated at 4.9% of the GDP lower than the FY2023-24 target of 5.6%. It is expected that the Union Budget 2025 will not focus on a sharp reduction in the fiscal deficit target and will likely keep it at 4.5% of the GDP. It will increase the government's focus on spending and boost the subdued GDP growth with higher capex allocation," Subhash Chand Aggarwal.

With a focus on raising non-tax revenues to support the country's fiscal health, there is also a 15.88% YoY rise in net direct tax collection at ₹16.90 lakh crores in FY25 (as on January 12, 2025).

6. India: A Stable Haven Amid Global Turmoil, Poised to Attract Long-Term Investments

"India is in a uniquely advantageous position on the global stage as one of the only economies of scale that is an island of political calm amongst turbulent seas. There have been concerns about valuation-driven overheating in Indian equities, but despite some anticipated correction, the appetite for investing in India remains strong. Given this perspective, it is imperative that India seeks aggressively to route further capital flows towards inwards, while also ensuring that these flows carve long-term and deep channels," according to Utkarsh Sinha - Managing Director - Bexley Advisors.

7. Budget 2025: Leveraging Global Trade Conflicts to Position India as a Manufacturing and Tech Powerhouse

"Another opportunity lies in being creative, agile and decisive in taking advantage of global tariff conflicts and positioning India as a preferred nation in key manufacturing, tech and IP sectors that can build and sustain long-term moats for India," according to Utkarsh Sinha.

8. Budget 2025: Driving MSME Growth Through Equity, M&A, and Private Investment for Global Scale

⁠India's MSME sector has got to a certain point of growth and scale, but the next inflexion point in growth can't arrive without spades of equity capital and equity transactions. We need to see massive-scale M&A and consolidation in India's MSME sector, and private equity-driven growth to ensure that MSMEs graduate to become large scale and even global companies that can essay the next scale story in their lives and create room for the next batch of MSMEs to grow into the space they vacate, serving as suppliers and sellers to them, as per Utkarsh Sinha - Managing Director - Bexley Advisors.

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